Uncategorized

A Euro On the Move September 05, 2014

Posted by Knowledge Leaders Team in Uncategorized

Following the ECB’s June meeting, we noted (here) a curious disparity in the relationship between the EUR/USD exchange rate and the spread between interest rates in Europe versus the U.S.  While the euro had failed to move lower then (as it has in the past), the relationship appears to have reasserted itself more recently.

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US Dollar Breakout & Growth Counter-Cyclical Outperformance September 05, 2014

Posted by Knowledge Leaders Team in Uncategorized

The trade weighted US Dollar broke out of a four year range in the last couple days, eclipsing the June 2010 highs.  Alongside this breakout in the USD, North American growth counter-cyclicals have made a new high in relative performance compared to the MSCI World Index.

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Cyclicals: Early or Late September 04, 2014

Posted by Knowledge Leaders Team in Uncategorized

For the first part of the year, early cyclicals (consummer discretionary sector) in North America underperformed late cyclicals (energy, material and industrial sectors), which made perfect sense given the appearance of a strengthening economy and the tapering of FRB asset purchases.  Recently, however, early cyclicals have come back to lead late cyclicals.

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US Mortgage Applications Still Can’t Get Off The Mat September 03, 2014

Posted by Knowledge Leaders Team in Uncategorized

Each Wednesday morning we look forward to seeing if this will be the week that mortgage applications finally start to mirror the bounce we have seen in housing starts and existing home sales this year. Once again, however, housing starts remained weak.

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The March Toward Negative Yields In Europe September 02, 2014

Posted by Knowledge Leaders Team in Uncategorized

We noted last week that there are six European countries that currently have zero or negative year-over-year percentage change in their consumer price index. It is rare for consumer prices to fall into negative territory. Perhaps equally as rare, investors are now paying to lend money to five governments across Europe.

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US Manufacturing Strength Stands Alone September 02, 2014

Posted by Knowledge Leaders Team in Uncategorized

The US ISM Manufacturing index surged to a three-year high today at 59 for August. The Markit Manufacturing PMI for the US made a 52-month high as that index rose to 57.9. However, the Markit Global Manufacturing PMI is only moderately above the expansion level of 50. The latest reading for August was 52.6.

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US Home Prices Rise In July September 02, 2014

Posted by Knowledge Leaders Team in Uncategorized

CoreLogic released their home price index for July today and it showed another 1.25% month-over-month gain in June (including distressed sales). Their index is 7.4% higher than one year ago. If you exclude distressed sales, house prices still rose by 1.07% in July and are 6.76% higher year-over-year.

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Another Package of Weak Japanese Economic Data August 29, 2014

Posted by Knowledge Leaders Team in Uncategorized

Today saw another weak package of weak economic data out of Japan. Some highlights were industrial production turning negative year-on-year, real personal income and consumption expenditure posting another round of deep year-on-year declines, and housing starts which continued to plummet year-on-year.

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World Inflation Makes 56-Month Low August 29, 2014

Posted by Knowledge Leaders Team in Uncategorized

Our world inflation proxy, which simply takes the equal-weighted, year-over-year change for 33 different countries CPI, hit its lowest level since November 2009. The proxy stands at 1.72%  which is just lower than the level it hit in February.

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Secular Stagnation & Personal Savings August 29, 2014

Posted by Knowledge Leaders Team in Uncategorized

In his Presidential Address to the American Economic Association in December 1938 Alvin Hanson presented his ”secular stagnation” hypothesis.  He argued that US faced a crisis of deficient demand and underinvestment due to declining population growth after the closing of the frontier to new immigrants.

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Unmatched Month To Month Volatility In Chicago PMI August 29, 2014

Posted by Knowledge Leaders Team in Uncategorized

The headline reading for the Chicago PMI blew away consensus expectations for August. Expectations were for the index to rise to 56.4 and the actual data point came in at 64.3. This is after the headline came well below in expectations in July. The series dropped by 10.04 from June to July.

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The Modern Day Widow Maker Trade is to Short Treasuries August 28, 2014

Posted by Knowledge Leaders Team in Uncategorized

As treasury yields plunge again today to new 1-year lows (the 10 and 30-year treasury bond yields are both down 3bps to 2.33% and 3.07%, respectively), we are reminded of a popular trade over the last decade to short Japanese government bonds, which has aptly been named the ”widow maker” trade.

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